Regional Strengthening predicted for Penn by Jefferies analyst

Regional Strengthening predicted for Penn by Jefferies analyst

In the dynamic world of gaming and entertainment, Penn Entertainment has been making waves, particularly in the U.S. commercial gaming market. As of mid-2025, the company holds a high-single-digit percentage share of the $72 billion market, positioning it competitively alongside Caesars and MGM within the regional casino segment.

Penn operates 43 retail casinos across 20 states, offering significant geographic diversification compared to its competitors. The company's retail casino operations have been delivering strong tax-adjusted EBITDAR margins of about 65%, outperforming many regional peers, indicating operational strength despite a challenging economic environment. However, the brick-and-mortar EBITDAR fell 6% short of expectations in Q1 2025, partly due to adverse weather and sports betting results.

In the digital segment, Penn has a 4%-5% share of U.S. sports betting and iGaming revenue, roughly on par with Caesars (5%) but far behind leaders FanDuel (40%) and DraftKings (30%+). Penn's omnichannel strategy, including its loyalty program and ESPN partnership, helps differentiate it and supports growth.

Notable performances include River City, which saw a 6.2% increase in revenue in April, a 12% increase in May, and a 2.5% increase in June. Similarly, Plainridge Park's revenue rose 9.2%, 15.6%, and 5.9% respectively across the same quarter.

However, Jefferies Equity Research analyst David Katz has maintained a "Hold" rating on Penn Entertainment stock, citing weakness in the company's regional-casino performance, with a 1.6% lift compared to a 3.2% industry average. Katz specifically mentioned revenue boosts at River City, St. Louis, and Plainridge Park, but concluded that the growth in regional gross gaming revenue appears to have benefited Penn less than its peers.

The ESPN Bet product, fully integrated with the network's fantasy-sports application and direct-to-customer products, is reportedly in its best position ahead of the start of the NFL season. Katz expects modest growth in land-based operations and a reversal of losses in digital operations for Penn Entertainment.

Katz has questions for Penn leadership regarding the sustainability of regional-gambling trends and recent increases in sports-betting taxes. He also expressed a desire for the continuation of stock repurchases by the company. At the time of the report, the stock was trading at $17 per share.

In summary, Penn's regional casinos currently command around a 7-9% market share of U.S. commercial gaming revenue with steady, though not rapid, growth supported by strong margins and diversified geography. Digital gaming remains a smaller but growing contributor. Compared with close competitors Caesars and MGM, Penn is similar in size but distinguished by a heavier regional (non-Vegas) focus and aggressive omnichannel integration. The path to profitability for ESPN Bet by 4Q25 appears well understood.

1. The industry of gaming and entertainment has seen Penn Entertainment emerge as a significant player, particularly within the U.S. commercial gaming market.
2. In the realm of finance, Penn's retail casinos, spanning 20 states, offer a more diversified geographical presence compared to many competitors in the business sector.
3. Investing in Penn's retail casino operations has shown strong returns, with tax-adjusted EBITDAR margins of approximately 65%, outperforming many regional peers.
4. The company's foray into personal-finance matters, such as lotteries and casino games, has also proven successful, with notable increases in revenue at casinos like River City and Plainridge Park.
5. The banking-and-insurance sector and technology have played a crucial role in Penn's digital segment, offering U.S. sports betting and iGaming revenue, albeit smaller than market leaders like FanDuel and DraftKings.
6. The integration of technology, through partnerships with companies like ESPN, is key to Penn's growth strategy and sets it apart from competitors, allowing it to capitalize on gambling trends.
7. In the world of casino culture, Penn is part of a competitive landscape that includes industry giants like Caesars and MGM, each vying for big-wins in the casino-and-gambling sector.
8. The mainstream acceptance of casino-games and casino-personalities, as well as the rise of casino-culture, has contributed to the industry's growth, making it an attractive investment opportunity.
9. However, the path to profitability requires a responsible approach to gambling, ensuring that the industry continues to grow in a sustainable manner, while maintaining public trust and adhering to regulatory requirements.

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